I usually keep the udl in the same place as the app.. that way you can change your data source without changing code.. assuming your new data source is still compatable with your code etc.. makes it easy to point to test data or cwitch to an alternate server after a server crash etc...all with no code changes. If you pull this file from the same location for all users then you just change it once and redistribute nothing across your network.
To make the .udl file just create a blank text file and name it with a .udl extension.. from there dbl clicking on that file should open up some properties that you can set.. much like setting up a DSN.
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